EconSouth (Third Quarter 2005)

EconSouth (Third Quarter 2005)

Movie, TV, and video production companies operating outside of Hollywood bring states glitz and global exposure, but, more importantly, they infuse millions of dollars into local and regional economies. Some Southern states have been a quick study in creating attractive incentive programs and are trying to upstage each other to lure the film industry.

You don’t often read about states competing for film production companies the way they do for automobile assembly plants. Unlike car plants or microchip factories, a television or movie production typically opens without government subsidies and smiling politicians snipping ribbons.

That could be changing. Courting the film business is taking on the trappings of traditional economic development. States in the Southeast are coming to view movie and television productions as more than just glamorous curiosities. Following the example of Canada in the early 1990s and Louisiana in 2002, every state in the region has fashioned an economic incentive program designed to lure Hollywood to the South.

The thinking is as straightforward as an action-adventure flick formula. As many of the region’s traditional employers such as textile and furniture makers have shrunk and as competition for auto assembly plants has become fierce and expensive, Southern states have begun to pursue jobs and dollars in movies and TV and even in computer game development. Economic developers approach film studios just as they would manufacturing executives who shop the world for the cheapest place to build a factory. In effect, studios are doing the same thing—seeking the most profitable site to do business—and Southern states are trying to be that place.

When Ward Emling left Los Angeles and returned to his native Mississippi to head the state’s film office, he set about convincing skeptical colleagues and civic groups that he was one of them. The film business, he told them, needs the same ingredients their businesses do: a trained work force, good transportation, support services, and maybe even a little financial carrot.

“The way I explained it was, a film is just a little factory,” Emling said. “They select a site, they create an office, they create a product for interstate commerce, then they downsize and go away. And they hire a lot of people, and they spend a lot of money.”

The secret of Louisiana’s film success
Louisiana’s incentive plan is the one other states in the South and elsewhere aim to emulate. In late 2002 Louisiana began offering a tax credit equal to 15 percent of the production cost of movie and TV productions valued at $8 million or more. Since then, film crews have shot 60 movies in the state, spent $286 million there, and paid Louisianans another $90 million in salary and wages, said Alex Schott, director of the Louisiana Governor’s Office of Film and Television Development.

Several more films are shooting or have “wrapped” since those numbers were tallied, he said. Without the state rebate, Schott figures, 98 percent of the films, including all the larger productions, would have shot elsewhere.

“Louisiana, along with New Mexico, just clearly overtook 99 percent of the United States with their incentives,” said Michael D. Barnes, commissioner of the publicly funded East Tennessee Television and Film Commission.

In a sense, Louisiana’s rebate plan has worked almost too well. The $100 million the state has paid in credits to film producers has caused some legislators to worry that the state is forgoing too much revenue. That thinking led the Louisiana legislature this year to trim the tax credits to apply only to money spent within the state rather than to all production spending, as was the case before.

How green was my incentive plan
Under state incentive packages, makers of feature films, television movies, documentaries, commercials, and short films receive rebates and tax breaks generally pegged to how many locals they hire and how much they spend locally. Around the South, other states have similar programs: Georgia’s legislature passed the Georgia Entertainment Industry Investment Act during its 2005 session, and Mississippi created the Mississippi Motion Picture Incentive Program in 2004.

Tennessee has a smaller incentive program in place, and Barnes and other state film boosters are backing a plan to expand the program. They hope it will pass the state’s legislature in 2006 after failing to make headway this year. The current program refunds out-of-state motion picture production companies’ sales and use taxes. Alabama established a similarly minor incentive program in 1991 that was due to expire Sept. 30, 2005, but was recently extended a year.

Linda Swann, acting director of the Alabama Film Office, hopes the state legislature will enact a tax credit next year to encourage production outfits to hire Alabamians. The measure died in the legislature this year.

Meanwhile, in August, Swann’s office launched a program designed to help Alabama county and city economic development agencies market themselves to film production companies. And an economic development group in Birmingham, the Metropolitan Economic Development Board, is setting up a film office there this summer or fall, Swann said, bringing Birmingham in line with most similar-sized and larger cities.

In Florida, legislation for an Entertainment Industry Financial Incentive program passed in 2003, but because of a budget crunch it wasn’t funded until 2004. For the 2005–06 fiscal year, the state’s budget includes $10 million for the program.

All these incentives are aimed at luring some of the “runaway” productions that go to Canada or other countries, where filming is inexpensive. “Whether we’re in the Southern United States, the South of France, or South Africa,” Emling said, “our charge is finding ways to make our jurisdiction more attractive for this industry.”

Incentives matter to filmmakers. A group of small Los Angeles–based production companies probably wouldn’t be filming in Georgia this summer without them, said David Koplan, one of the producers of the comedy film “Randy and the Mob.”

“It makes an enormous, enormous difference,” he said. “It’s a really big deal for a small movie. It can make the difference in [our] being able to come to a city or not.”

Photo courtesy of Louisiana Governor’s Office of Film and Television Development

The color of money
When the movies come, the economic impact can be pervasive. In Louisiana, for example, workers on a movie set generally earn between $25 and $30 an hour for carpentry, pulling cameras, and setting up equipment and lighting, Schott said. Louisiana construction jobs, by comparison, paid an average of about $16 an hour based on a 40-hour week in 2003, according to data from the Louisiana Department of Labor.

When Warner Bros. spent six months in Canton, Miss., filming “A Time to Kill,” the 1996 adaptation of John Grisham’s best-selling novel, the production staff spent $250,000 a week on food, lodging, equipment, wages, transportation, and other services, Emling said. “O Brother, Where Art Thou?” paid 1,483 Mississippians $2.5 million in salaries and fringe benefits during two-and-a-half months of filming in the summer of 1999. The Coen Brothers’ production spent a total of $5.15 million in the state, including $594,318 just on lodging.

Big cities in the region such as Atlanta and Miami have long enjoyed the fruits of local film production. Granted, the activity there is small compared to the major North American centers of Los Angeles, New York City, and Vancouver and by all accounts has tapered off in recent years as productions fled to Canada and other lower-cost locales.

Florida’s most recent comprehensive survey of the state’s film industry, conducted by Economics Research Associates in February 2003, showed that film, television, and video production paid more than $372 million to Florida workers in 2001. From 1995 to 2001, employment in such productions grew by 94 percent, according to the survey.

Miami accounts for much of that activity. Through the first seven months of 2005, 1,375 film, TV, music video, and photography productions obtained permits from the Miami-Dade Mayor’s Office of Film and Entertainment and the cities of Miami and Miami Beach. The productions spent a combined $81 million and hired 20,850 locals for at least brief work, according to FilMiami, the city’s film commission.

In July alone, 46 productions were being filmed in the Miami area, including 17 TV series and made-for-TV movies. Six Spanish-language television programs were in production, along with the fourth season of CBS’s “CSI: Miami.” Universal Pictures was shooting a “Miami Vice” movie starring Jamie Foxx and Colin Farrell.

Part of the genesis for Georgia’s recently enacted film industry incentive package was the drop in the number of movies filming in Georgia recently as other states like Louisiana began dangling larger incentives. In 2004, 252 productions, including movies, TV episodes, commercials, and music videos, injected $123.5 million into Georgia’s economy, according to the Georgia Film, Video & Music Office. As far back as 1991, movie productions generated about $300 million annually for Georgia’s economy.

Tennessee TV
Meanwhile in east Tennessee, television production has become a significant industry since Scripps Network bought Knoxville-based Cinetel Productions in 1994. A unit of the E.W. Scripps Co., Scripps Network’s holdings include Home & Garden Television (HGTV) and the Food Network. Scripps develops much of the programming for those networks in Knoxville, employing 600 people. HGTV reaches about 87 million U.S. television households and the Food Network about 86 million. Just as important for Knoxville, Scripps Network has helped to spawn an industry that includes more than 30 TV production companies, according to a survey by the East Tennessee Television and Film Commission.

A more generous incentive plan would attract more moviemakers to the state and complement the experienced production crew base that Tennessee, especially Knoxville, has amassed, Barnes figures.

How to succeed in the film business by really trying
But incentives alone aren’t enough. Experienced workers, caterers, and camera and equipment rental houses are essential if incentives are to have any lasting effect, film recruiters said. Low costs alone will not sustain a film industry. Consequently, Louisiana is beginning to amass just such an infrastructure of people, facilities, and suppliers as the state’s film industry matures, Schott said. The state of Mississippi has set aside a 25-acre “Film Enterprise Zone” north of Jackson—which Emling calls “an industrial park for the film industry”—where work is scheduled to start this year on a film crew training center.

To be sure, the South is unlikely to ever rival Hollywood or New York as a locus of the film and television industry. But if states’ recent actions are a guide, many believe entertainment can be a legitimate cog in the economic wheel of the region. “It’s really about the bottom line,” said Schott. “If we get those productions here, they spend a lot of money and you get global exposure.”

Take My Picture

Southern states offer filmmakers a variety of incentives, and notable movies have been filmed in each state.

Louisiana
Under the revised plan, tax credits are granted equal to 25 percent of a production company’s Louisiana production spending.

An employment tax credit of up to 20 percent is available.

Notable movies: “Ray,” “The Dukes of Hazzard,” “Failure to Launch”

Florida
The state reimburses 15 percent of qualified Florida expenditures up to a maximum of $2 million on motion pictures, $450,000 on television movies and pilots, and $150,000 for individual television episodes.

Digital media companies are eligible for reimbursement on qualified Florida expenditures of 5 percent of annual gross revenues with a maximum reimbursement of $100,000.

Georgia
Tax credits of 9 percent of production expenditures in Georgia are provided.

Another 3 percent tax credit is available for all Georgians hired and 3 percent on qualified spending in poorer counties.

Notable movies: “Driving Miss Daisy,” “Midnight in the Garden of Good and Evil,” “Diary of a Mad Black Woman,” “Smokey and the Bandit”

Tennessee
A refund of sales and use taxes is available provided that the production company has spent more than $500,000 in connection with filming in Tennessee and that filming has been completed in less than 12 months.

Notable movies: “Hustle & Flow,” “Wag the Dog,” “The Green Mile”

Alabama
Abatements are available for sales and use taxes for certain projects on all materials and equipment purchases and leases for documentaries, videos, and commercials with expenditures in Alabama of $100,000 or more or for feature-length films with more than $1 million in Alabama expenditures.